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Drilling forecast cut by 500 wells on lower spending by Canadian producers

CALGARY – The Petroleum Services Association of Canada is slashing its 2018 drilling forecast to 7,400 oil and gas wells, down from 7,900 it predicted in its last forecast in October, but still ahead of the 7,094 actually drilled in 2017.

The group representing companies that provide services to oil and gas producers says the lower expectation comes as some of its members are cutting staff to deal with the shortage of work.

PSAC CEO Tom Whalen says higher prices paid recently for New York-traded West Texas Intermediate oil are welcome but lower prices for western Canadian oil due to insufficient pipeline takeaway capacity means Canadian producers don’t have as much money as their American rivals to spend on exploration and development wells.

He says a preference by customers to drill oil wells instead of gas wells due to worse prospects for gas pricing has resulted in its B.C. drilling forecast falling by 110 wells, a reduction of about $850 million in capital spending by the industry in that province.

He says Saskatchewan, which is more prone to producing oil, is expected to see over 300 more wells drilled this year than in 2017 at a cost of about $400 million.

PSAC’s updated forecast assumes an average Alberta natural gas price of C$1.75 per thousand cubic feet and a WTI crude oil price of US$61.45 per barrel this year.

“It’s shameful that we continue to sell our oil to the U.S. at a steep discount to WTI, short-changing Canadians over $15 billion per year,” said Whalen in a news release.

“The sooner we expand our customer base, the better off Canadians and, quite frankly, the rest of the world will be.”